France, Germany make case for massive joint coronavirus recovery plan

Brussels (dpa) – France and Germany on Tuesday drummed up support for a proposed 500-billion-euro (545-billion-dollar) European recovery fund ahead of a virtual meeting of EU economic and finance ministers.

French Economy Minister Bruno Le Maire described the joint initiative as a “historic breakthrough” that marked “the first time … France and Germany stand together” on taking on debt at the level of the European Union.

The two leading members of the bloc, previously on opposing sides of a debate on EU fiscal stimulus, on Monday proposed allowing the European Commission to raise billions in debt on capital markets on behalf of the EU for the first time.

The funds would then be channelled to economies hit hard by the coronavirus pandemic as grants from the EU’s next long-term budget.

The proposal will be discussed by EU finance ministers on Tuesday, German Finance Minister Olaf Scholz said in a joint statement with his French colleague.

The proposed move has garnered positive reactions from Spain, Italy and the EU institutions, though fiscally conservative Austria has stressed it still wants any stimulus to be issued as loans rather than grants.

The idea is “ambitious, well-aimed and welcome,” European Central Bank President Christine Lagarde said in a Tuesday interview.

“This is a demonstration of the spirit of solidarity and responsibility that the [German] Chancellor [Angela Merkel] talked about last week,” the ECB chief added.

The Franco-German initiative is a bid to speed up progress on a long-term recovery package in response to what looks set to be a recession of historic proportions for the EU.

Any proposal for a recovery mechanism subsumed within the EU budget faces a long approval process. EU capitals will have to sign off on the whole seven-year spending plan starting from 2021.